Are rising costs forcing Canadians to rethink their 2025 money moves?

Nearly a third (30 percent) of Canadians plan to reduce their spending in 2025 as concerns about the rising cost of living continue to grow.

According to a special report from the BMO Real Financial Progress Index, 46 percent of Canadians say higher living costs are influencing their financial resolutions for the new year—up 4 percent from 2023.

The report highlights that Canadians are worried about cost of living increases (54 percent), inflation (50 percent), and the potential for a recession (42 percent).

Financial anxieties include fears of unexpected expenses (82 percent), concerns about overall financial stability (82 percent), housing costs (73 percent), family-related expenses (67 percent), and managing monthly bills (64 percent).

Despite these challenges, most Canadians (87 percent) feel they are making real financial progress, and 72 percent express optimism about their financial future in 2025. Over a third (37 percent) report feeling more financially secure than they did a year ago.

Around 21 percent of Canadians plan to set financial goals or a budget for 2025. Among the 69 percent who already have financial objectives, saving for retirement (58 percent), vacation planning (47 percent), and paying down debt (40 percent) are top priorities.

However, many Canadians lack structured plans. Only 33 percent currently have a financial plan, and 59 percent do not have a household budget. While 36 percent anticipate making significant purchases in the coming year, 24 percent intend to adjust their plans to account for the rising cost of living.

The report also notes that 92 percent of Canadians review their financial plans at least once annually, indicating a widespread commitment to staying on top of financial management.

According to BMO Economics, Canadian households could benefit from lower borrowing costs in 2025 as the Bank of Canada continues its easing policy.

After reducing its overnight target rate by 175 basis points since June 2024, an additional 75 basis points of cuts are expected in the first half of 2025.

While longer-term borrowing costs have already fallen sharply, any further declines are likely to be moderate as economic activity begins to recover.

Anthony Tintinalli, head of Specialized Sales at BMO, encouraged Canadians to take charge of their finances.

“The new year marks a fresh start for self-reflection and improvement, and we want to empower Canadians to focus on building good habits and making real financial progress by encouraging them to get a head start on defining their financial goals,” Tintinalli said.

BMO offers several strategies to help Canadians maintain their financial resolutions:

• Start early: Account for major upcoming events, like vacations or weddings, and create savings goals.
• Pay your future self-first: Automate contributions to accounts such as TFSAs, RRSPs, or FHSAs to achieve long-term goals and benefit from compound interest.
• Use loyalty programs: Maximise rewards from programs like AIR MILES for everyday purchases and redeem them for travel, appliances, or other needs.
• Monitor budgets regularly: Digital tools like BMO Insights track income and expenses, helping Canadians refine their financial plans.
• Seek professional advice: Financial advisors can create personalized plans tailored to individual goals and circumstances.

BMO provides several resources to help Canadians stay financially on track:

• BMO SmartProgress: A free online platform offering interactive lessons on budgeting, credit management, and investing.
• BMO CreditView: A tool for monitoring credit scores and managing credit profiles.
• BMO Insights: Provides tailored advice on spending patterns and savings, including features like CashTrack, which predicts potential cash flow shortages, and Spend Categorization, which flags significant spending changes.
• BMO Savings Amplifier Account: This account offers competitive interest rates, no monthly fees, and tools to set and monitor financial goals.